Looking for a Property Manager to manage your investment property? Here are some tips:
Carefully selecting the right property manager is one of (if not) THE most important step(s) of owning investment properties. Having the right property manager will impact profitability, risk, and enjoyment of the venture like few other decisions an owner will make. This is true even for owners that decide to self-manage: they’re still selecting a property manager (themselves) and should still evaluate that choice as though they are one of the agents competing for the job of property manager.
The job of property manager varies somewhat depending on the type of property being managed (so of course one consideration is a Property Manager’s experience with a particular type of property), but there are some considerations that apply to selecting a Property Manager for all rental types. Below are some elements to consider, with thoughts on each. They’re in no particular order, and I believe they should all play a role in making the correct choice.
As in all professions, there is a learning curve. A primary reason for hiring a professional is to not start at the beginning of that curve. There are perhaps 100 issues that routinely arise in the course of managing property and choosing an agent that has been around to have seen, and learned how to respond to, the majority of them will pay dividends. That said, I wouldn’t necessarily automatically rule out a newer agent (with off-setting strengths), but I would then more carefully assess the team and support such an agent would have to rely on.
Another key reason people hire managers is the convenience of having someone else track all of the details involved in managing property. If an agent doesn’t stick around, that loss of continuity usually results in details (sometimes important ones) being dropped and an owner’s time being wasted. Therefore, I’d suggest looking for signs that the agent (and company) you choose is likely to still be in the business 5 to 10 years down the road.
Finding an agent who will reliably give honest answers, even when it’s not in their immediate self-interest, is crucial. Sometimes the answer to an owner’s question isn’t one they want to hear. [i.e.: “How much can I rent this property for?” Too often, the Agent that answers this question with the highest number is simply not telling the truth.] Use an agent who is candid and follows through with their word.
One agent can only handle so many properties well. That number varies depending on the type of properties, type of leases, and management structures they employ, and on the particular agent; but there’s always still a number at which an agent is maxed out, and over which the quality of the service they’re providing will diminish. So, while experience matters (a lot), picking an agent that’s going to be too busy to adequately focus on your property isn’t good either. Ask ‘How many accounts they manage?’, ‘How many they managed two years ago?’, ‘How many more they would take on before considering their portfolio to be full?’.
The job of property manager isn’t that of a salesman, nor of an attorney, nor accountant, nor economist, nor psychologist… but it has elements of all those professions. A good manager has skills in all these areas so that disputes are avoided. Then, when disputes inevitably arise anyway, they’re excellent at disputed resolution. Look for someone who is not volatile but is good at thinking long-term and is results oriented; someone that sees the value of having all parties go away satisfied rather than one that will engage in and try to ‘win’ every argument.
As you’re looking for stability, look for someone that you will enjoy working with over the course of years. Some personalities just don’t mesh, regardless of all the other factors. Recognizing and respecting when that’s the case will make life easier.
Artists don’t necessarily need to be organized. Property managers necessarily do. Look for signs. Do they have systems in place to ensure that all details are always covered? Do they show up on time and well prepared?
A property manager is going to be speaking (and writing) for you. Their communication is therefore a reflection of you, and the devil is in the details. In most cases, you’ll be giving your property manager a limited power of attorney to execute written agreements for you. Make sure they can communicate carefully and accurately. Well-written agreements (and clearly enunciated conversations) will greatly minimize future disputes.
Like all services you buy, price is a consideration, so that’s not a point I need to make here. My point on price is: I see a lot of people comparing the price of property managers without comparing the other attributes those property managers have. They don’t do this with properties, they don’t do it with cars, or clothes, but… they often tend to assume property management is a commodity.
What most investors care about is profitability. Profitability is primarily impacted by minimizing vacancy and litigation while maximizing rental rates through proper maintenance and marketing. So, while the fees paid to a property manager are on the balance sheet too, keep in mind the other balance sheet factors that a property manager influences. They’re much more impactful on the overall profitability of an investment.
I’d look for structures that align an owner’s interest with the property manager’s.
A long property management agreement isn’t an enjoyable read for owners any more than a long lease is for tenants. But a stitch in time saves nine. By taking the time to properly address all the pertinent issues covered in these long documents, a good property manager is diligently communicating so that future conflicts are avoided. Beware a 1- or 2-page agreement that leaves unknowns out there. If that’s the level of attention being paid to details… that’s not good.
Technology is rapidly advancing. Look for an agent that is incorporating new tools to maximize benefits for their clients.
Accounting and Administrative Support
Consider the level of support their team will be providing and the type of software they’ve invested in. What kind of access will you have to conveniently track your portfolio and that your tenants will have to pay rent.
Choosing a firm with a good local presence associates your property with that reputation. When potential renters see a reputable brand, they infer that their relationship with such a landlord will be transacted in accordance with the business standards associated with that brand. Many will find value in that level of comfort, and such considerations will help your property achieve its highest market value.